Executive Summary: Key Legal and Evidentiary Issues

• Norgéreq Ltée claimed $1,591,012 from the Ville de Montréal following the termination of a lump-sum construction contract for the redevelopment of Bain Saint-Michel.
• Central to the dispute was whether administration and profit fees were payable based on the percentage of work completed or on the number of days elapsed.
• Entitlement to daily site extension costs was contested, as the contractor failed to provide supporting documentation as required under the contract.
• Compensation claimed on behalf of subcontractors and suppliers was rejected on the basis that no direct legal relationship existed between those parties and the Ville de Montréal.
• Release of the contractual holdback of $226,984 was made conditional on the contractor providing releases from subcontractors and suppliers who had denounced their contracts or registered legal hypothecs, and a release from Techniverre+.
• Liquidated damages for termination were calculated at $104,690 — an amount exceeding the contractor's own claim of $85,767 — and the court gave effect to the Ville de Montréal's offer to pay that sum.

Facts of the case

Following a public tender process, the Ville de Montréal awarded Norgéreq Ltée a lump-sum construction contract worth more than $5 million for the redevelopment of Bain Saint-Michel. Work was scheduled to begin at the end of April 2021 and was expected to span 365 days. Once underway, however, site conditions proved far more challenging than anticipated. Numerous change orders were issued, exhausting the contingency budget. The Ville de Montréal suspended the works on 2 June 2022 and formally terminated the contract on 25 August 2022 — by which point only approximately 30% of the work had been completed.

Norgéreq Ltée brought a claim against the Ville de Montréal for $1,591,012, divided into five heads: administration and profit fees; daily site extension costs; compensation for subcontractors and suppliers; the contractual holdback; and liquidated damages for termination. The Ville de Montréal filed a subsidiary counterclaim seeking reimbursement of site overhead fees it alleged had been overpaid.

Contractual and policy terms at issue

Several provisions of the general and special administrative conditions governed the dispute. Clause 13.2.3 of the special administrative conditions provided that site overhead costs, including administration and profit fees, were payable at each progress billing on a pro rata basis of the progress of the construction schedule. Clause 4.5.2.2 of the general administrative conditions set out the Ville de Montréal's obligations upon exercising its unilateral right of termination: it was required to pay the contractor the cost of work performed up to receipt of the termination notice, together with liquidated damages calculated on a sliding scale applied to the remaining contract balance — 4% on the first tranche up to $1 million and 3% on the tranche between $1 million and $5 million. Clauses 4.3.11.1 to 4.3.11.4 permitted the Ville de Montréal to withhold the contractual holdback pending receipt of releases from subcontractors and suppliers who had denounced their contracts or registered legal hypothecs against the property, or where a claim could give rise to financial liability for the Ville de Montréal.

Reasoning and analysis

On administration and profit, the court rejected Norgéreq Ltée's position that those fees should be paid in full based on the passage of 365 days. The court found that entitling the contractor to profit on work never performed would constitute unjust enrichment and was irreconcilable with both the contract and established case law, including the Court of Appeal's decision in Pelouse Agrostis Turf inc. c. Club de golf Balmoral (2003 RJQ 3043), which confirmed that a contractor is entitled to profit only on the portion of work actually carried out. Article 2129 of the Civil Code of Québec, which governs a client's obligations upon termination, was also cited in support. The court noted that the contractor had already received payment corresponding to 30% progress — the percentage established by supervising professionals at the time of suspension — and that its position would have led to an outcome where the Ville de Montréal owed more than if the works had been fully completed.

On daily site extension costs, Norgéreq Ltée sought $342,186 by dividing the total conditions générales of $1,238,000 across 365 days, arriving at $3,392 per day. The court found this approach both inflated — as it double-counted the $911,500 administration and profit already addressed separately — and unsupported by any justifying documentation. The contract expressly required the submission of supporting documents, which the contractor refused to provide despite the Ville de Montréal's representative, Ricardo Leoto, seeking to meet with the contractor to discuss the matter. The court preferred the assessment prepared by the Ville de Montréal's expert from GLT+, Haythem Bseyhia, who analyzed the architect Lemay's plans, photographs, and industry cost data published by the Association de la construction du Québec to determine that actual prolongation costs amounted to $127,523 (taxes included).

The claim for compensation on behalf of subcontractors and suppliers was dismissed. The court noted that no direct legal relationship existed between those parties and the Ville de Montréal, and that the contract's termination indemnity provisions applied solely to the general contractor. No subcontractor or supplier testified in support of the claim. The court also observed that the Ville de Montréal had in any event exercised considerable discretion in accepting certain third-party costs — including paying $86,000 to Techniverre+ for an item that Norgéreq Ltée had estimated at only $10,000 in its tender.

On the holdback, the court found that the Ville de Montréal had not established that any subcontract had been denounced to it or that any legal hypothec had been registered against the property. It therefore held that the Ville de Montréal was not generally entitled to withhold the $226,984 holdback — with the exception that a release from Techniverre+ was required, given the significant payment made to that supplier following termination. On interest, the court exempted the Ville de Montréal from paying interest on the site extension costs, finding that the contractor's claim had been unreasonable and unsupported by documentation and that the Ville de Montréal had been justified in invoking the exception of non-performance; interest on those costs would run only from the expiry of the appeal period. For the termination indemnity and the contractual holdback, legal interest and the additional indemnity under Article 1619 of the Civil Code of Québec were awarded, running from the date of service of the originating application. The subsidiary counterclaim for reimbursement of site overhead fees was dismissed, the court finding that those costs had been properly amortized over the full contractual duration and were not reduced by the slowdown in works.

Ruling and overall outcome

The court allowed the claim in part and dismissed the counterclaim as moot. Norgéreq Ltée was the successful party. The Ville de Montréal was ordered to pay $127,523 (taxes included) for daily site extension costs, with legal interest and the Article 1619 additional indemnity from the expiry of the appeal period; $104,690 (taxes included) as the contractual termination indemnity, with legal interest and the additional indemnity from the date of service of the claim; and $226,984 (plus taxes) as the contractual holdback, with legal interest and the additional indemnity from the date of service, conditional upon Norgéreq Ltée providing releases from any subcontractor or supplier who had denounced a contract to the Ville de Montréal or registered a legal hypothec against the subject property, and a release from Techniverre+. The total monetary award ordered was $459,197, before applicable taxes on the holdback amount and before interest. Costs were awarded against the Ville de Montréal.